School funding negotiations between Daniel Andrews’ newly elected government and the commonwealth have ground to a halt a day. The premier with his education minister, James Merlino.
Photograph: James Ross/AAP

Victorian schools could lose billions of dollars next year because the state and federal governments cannot come to an agreement on a long-term funding deal.

Negotiations between Daniel Andrews’ newly elected government and the commonwealth have ground to a halt a day out from Friday’s education council meeting, as the state continues to stare down Canberra.

The Victorian education minister, James Merlino, released a statement on Thursday revealing that the commonwealth had rejected his offer of a compromise agreement, and saying he “won’t be bullied” into signing a “dud” funding deal.

“Victoria won’t be bullied into signing a dud multi-year deal for school kids by a belligerent leader of a minority government,” Merlino said.

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“It unfairly funds public school students less than private school students.”

The Victorian government has demanded the federal education minister, Dan Tehan, increase the federal share of funding under the Gonski 2.0 model from 20% of the school resource standard for public schools to 25%.

Merlino said Victoria had offered to sign a one-year funding deal with the commonwealth, but said it had been rejected.

“Given the proximity to the next federal election, the unfairness and inequality of the deal currently on the table and Scott Morrison’s unreasonable approach to negotiations, we asked the federal government to consider the possibility of an interim one-year deal,” he said.

“Scott Morrison has already recklessly rejected this proposal. This proves he is willing to hold kids to ransom to force through his unfair education deal.”

The commonwealth says the Education Act requires a new funding agreement to be in place by 31 December or it cannot make payments that amount to $150m for Victorian public schools in January and $1.55bn for its non-government schools in the first six months of the year.

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But on Thursday Merlino said Victoria had received departmental advice that the funding could still flow without a deal in place.

“The very strong advice I have received from the Education Department is that federal funding can flow for schools without a national agreement in place,” he said.

But Victoria has not said it would make up the shortfall, and on Thursday Merlino sought to put pressure back on the commonwealth to provide the funding or risk facing the wrath of the Catholic and independent school sectors.

“I will today write to both Catholic Education and Independent Schools Victoria to point out there is no impediment to them receiving federal funding for their schools.

“If Scott Morrison decides to withhold funding, then the responsibility for any impacts on schools rests solely and utterly with him.”

Because agreements with other states include no-disadvantage clauses, caving to Victoria’s demands could trigger additional payments totalling $25bn over a decade for state schools nationwide.